Am I allowed to lie to prospective buyers in my neighborhood in order to keep property values high?

What to say when a buyer asks you about something that you're worried might kill the sale or lower the house price.

Question

My neighbor is selling his house after many years. As a homeowner in the neighborhood, and a potential seller in the future, it’s in my interest to keep the property values as high as possible. Therefore, I want my neighbor’s home to sell for the highest possible price. My neighbor and I both border a third neighbor who throws crazy parties, reacts with hostility when we ask him to reduce the noise, and is generally obnoxious. If my neighbor’s prospective buyer asks me about the neighborhood, can I lie about this obnoxious neighbor, or leave out the key facts? If I tell the truth, I’m afraid the buyer might run away, or demand a lower price.

Answer

In this situation, you have a clear financial incentive to ensure that your neighbor’s home sells for as high a price as possible. After all, when you eventually sell your home, you want to be able to point to other homes in your area selling for high prices. So, can you lie about an obnoxious neighbor if this prospective buyer asks?

First of all, you are not the seller. You are under no affirmative obligation to answer a prospective buyer’s questions, or even to talk with him at all. You would not be breaking any laws by simply not replying to his inquiries. Indeed, a prospective buyer would be unlikely to draw any serious negative inferences from an unresponsive neighbor. Silence might be your best bet.

Second, if you do enter into a conversation with the prospective buyer, you need not lie in order to advance your interests. You could keep your comments general and describe the beauty of the neighborhood, the wonderful school systems, and the responsive local government. You do not need to lie explicitly and say, “That neighbor over there is always so quiet and well-behaved!” A lie like this is probably not “illegal”; you are not committing fraud, since you are not actually selling anything yourself. (The prospective buyer might have a stronger claim against the seller, if the seller were to make this affirmative representation).

Indeed, it is the responsibility of the buyer to do his due diligence before cutting a check. He should try to talk with multiple neighbors, not just you.

However, keep in mind that you may end up having to live next to this person. He will surely realize that you lied to him (i.e. when he witnesses the obnoxious neighbor), and he will probably also realize why you lied to him (i.e. out of self-interest). This will not make for a good neighborly relationship. You are better off avoiding this awkwardness by either not saying anything at all, or, if you must, keeping your comments general and not making any explicit misrepresentations about your obnoxious neighbor.

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